Accounts Receivable Aging

AAA

DEFINITION of 'Accounts Receivable Aging'

A periodic report that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding. Accounts receivable aging is a critical management tool as well as an analytic tool that helps determine the financial health of a company's customers, and therefore the health of their business.

INVESTOPEDIA EXPLAINS 'Accounts Receivable Aging'

If an accounts receivable aging demonstrates that a company's receivables are being collected much slower than normal, this is a warning sign that business may be slowing down or that the company is taking greater credit risk in its sales practices.

As a management tool, accounts receivable aging may indicate that certain customers are not good credit risks. It can therefore help a company make prudent decisions about whether or not to keep doing business with customers that are chronically late payers.

RELATED TERMS
  1. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  2. Cash Conversion Cycle - CCC

    A metric that expresses the length of time, in days, that it ...
  3. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  4. Days Sales Outstanding - DSO

    A measure of the average number of days that a company takes ...
  5. Accounts Receivable Financing

    A type of asset-financing arrangement in which a company uses ...
  6. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
Related Articles
  1. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  2. Understanding The Cash Conversion Cycle
    Investing Basics

    Understanding The Cash Conversion Cycle

  3. Company Survival: Cash Conversion Cycle ...
    Markets

    Company Survival: Cash Conversion Cycle ...

  4. Liquidity Measurement Ratios
    Markets

    Liquidity Measurement Ratios

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center